The figures moving among the wreckage conducted themselves with a quiet dignity that was not only moving and impressive, but also strangely familiar. The tsunami seemed to push parts of Japan back six decades, and we were reminded irresistibly of the stoicism and dignity with which the grandparents of this generation faced devastation and defeat after 1945. When the sea so roughly stripped away the glossy amenity of modern Japan, it took with it our fussy, pampered and faintly risible image of modern Japanese. What it left recalled the resilient and resourceful people who stood up among the ruins of Tokyo, Hiroshima, Nagasaki and countless other cities and built Japan’s postwar miracle.

The question naturally arises: Will today’s Japanese, having met disaster with the stoical grace of their grandparents, also show their grandparents’ strength and determination to recover from it? Not just from the tsunami itself, of course, but from the wider malaise that threatens to engulf Japan. Today the postwar generation’s miracle is foundering and the political, economic and social order that was built – the proud achievement of the ’50s and ’60s – seems to offer no way to save it.

At home, the Japanese economy has flatlined, debt has soared, morale has plummeted and the population will soon start shrinking. Internationally, Japan’s carefully constructed model of a different kind of major power is coming apart too. In the good decades Japanese hoped they could escape their militarist past by projecting their values and protecting their interests with moral example and economic aid rather than armed force. But after two decades of stagnation it is clear that the rest of the world doesn’t buy it. The Japanese themselves are losing faith, too, as the nation feels increasingly marginalised in the wider world and threatened by events in North-East Asia.

Many of these problems are driven by forces beyond Japan’s control but the inability to respond more effectively to them is the fault of a deeply dysfunctional political system. Over the past five years Japan has had five forgettable prime ministers. In 2009 the voters were alarmed and angry enough to turn out the Liberal Democratic Party that has ruled Japan almost continuously since the war. But the Democratic Party of Japan, elected in its place, has done no better. The way the current government has responded to the tsunami – especially the nuclear crisis that followed – has intensified the sense that Japan’s political system today simply cannot deliver effective government able to deal with passing crises, let alone address the much deeper and ultimately more demanding long-term challenges Japan faces.

The gravest challenges confronting Japan – economic and strategic – are made in China. Today, China is Japan’s largest trading partner and China’s growth has done more than anything to keep Japan’s economy merely stagnant rather than actually shrinking. But the longer-term trends are very sobering indeed. Japan lives by exporting high-quality manufactured goods. Its postwar economic miracle occurred because of the country’s capacity to climb the quality curve, producing ever better goods at ever lower costs and, in the process, earning ever higher margins. When other countries, such as South Korea and Taiwan, moved into the lower-quality end of manufacturing, Japan simply climbed further up the quality curve ahead of them.

But can it stay ahead of China in the same way? China already dominates the lower end of world manufacturing but it is moving relentlessly towards Japan’s domain. Japan’s nightmare is that China will catch up and start competing in the high-end markets Japan has called its own. In the 2020s there may be a Chinese Corolla, which is scary enough for Japan. But in the 2030s there may be a Chinese Lexus, built more cheaply by workers paid a fraction of Japan’s high wages; that is much scarier. By then, Chinese car manufacturers could well be doing to Toyota and Nissan what Toyota and Nissan did to Ford and General Motors in the ’80s. Japan needs a whole new economic model.

As China grows stronger, the logic of Japan’s unique postwar strategic posture is unravelling. For decades Japan has been a great power dressed up as a middle power, or even a small power. By remaining a strategic client of the United States, the world’s second-richest country (until 2010) has placed its security in the hands of the richest country. This act of faith and trust – surely unique in history – has served Japan well. But China’s growth could render this arrangement untenable.

Japan deeply fears that, as China grows stronger, it will squeeze Japan economically, politically and strategically, reducing Japan to a kind of Chinese dependency. The historical sources of this anxiety are understandable enough, from both sides. The question is whether Japan can confidently rely on the US to protect it against this possibility. Can it be sure that Washington will always put Tokyo’s interests ahead of Beijing’s if and when they clash? Unfortunately not.

China’s growing wealth and strength makes it both a more important partner and a more dangerous adversary for Washington. Inevitably this means Washington will try hard to avoid any clash where its own interests are not directly engaged. It will be more and more inclined to ask Tokyo to sacrifice its interests for the sake of Washington’s relationship with Beijing. Japan also fears the opposite risk: relatively minor disputes between Tokyo and Beijing could too easily escalate into major conflict between the US and China, which would be disastrous for Japan.

Either way, Japan’s strategic dependency on the US becomes more of a liability than an asset as China grows. If the US and China get on well, its interests will be sidelined and, if they get on badly, it will be drawn into an increasingly intense strategic competition between its two most important international partners. So, Japan needs a whole new strategic model too – raising immense political issues both at home and abroad.

Yet even after two dismal and demoralising decades, Japan has immense strengths. It is still the world’s third-largest economy and, on present trends, will not be overtaken for some time (ultimately, India may take its place). It still has remarkable technological depth and management skills. Productivity in many sectors of the economy outside manufacturing is low and could be increased sharply. Japan has a big population – at 128 million – and its declining workforce could be partly offset by expanding the low participation of married women. It could even contemplate immigration.

Japan also has formidable strategic potential. It will never again send huge armies to seize an empire on the Asian mainland but it has the economic, technological and demographic base to build and sustain truly forbidding air and naval forces for many years to come. Japan can be a very big player in the maritime strategic competition that is already breaking out in the western Pacific. And it could build and deploy nuclear weapons within just a couple of years.

In other words, Japan has the basic resources needed to be a great power in Asia for many decades. But Japan will need not just a new government but a new kind of government. A young Japanese friend said to me recently that the only way for Japan to avoid decline was by replacing the whole political system. Prime Minister Junichiro Koizumi, who resigned five years ago, was as good a leader as the present political system could deliver, and he was not good enough to halt Japan’s slide. What is needed, my friend told me, is a revolution – an end to money politics, careerist politicians and the rule of party bosses. A new politics formed by competing views of Japan’s future, rather than by competing factions and interest groups.

The idea of revolution in staid, hidebound Japan seems remote indeed. But Japan has taken sharp turns before – opening to the world in the 1860s, succumbing to militarism in the 1920s and accepting defeat in war in 1945. It could happen again. To many the idea is disconcerting. It is feared that if Japan ever moves away from the path it accepted in 1945, it will inevitably revert to militarism. But Japan is no more fated to relive its past than anyone else. After 60 years of responsible and often exemplary international conduct, it deserves to be given the benefit of the doubt.

Besides, it is in our interests – Australia’s and Asia’s more generally – that Japan should revive. In the Asian century we all need a strong, effective, confident and responsible Japan to help offset and manage China’s power, and we need a Japan that is comfortable and secure about its place in the regional order because, even in decline, it would be strong enough to disrupt the order if it isn’t. For all the bitterness of 1945, Australia’s relationship with Japan in the decades since has been by far our most successful in Asia. This is the relationship that has given us most confidence we can manage to build ourselves a place in the Asian hemisphere. We should not turn our back on it.

Hugh White is a professor of strategic studies at the Strategic and Defence Studies Centre, Australian National University.

The figures moving among the wreckage conducted themselves with a quiet dignity that was not only moving and impressive, but also strangely familiar. The tsunami seemed to push parts of Japan back six decades, and we were reminded irresistibly of the stoicism and dignity with which the grandparents of this generation faced devastation and defeat after 1945. When the sea so roughly stripped away the glossy amenity of modern Japan, it took with it our fussy, pampered and faintly risible image of modern Japanese. What it left recalled the resilient and resourceful people who stood up among the ruins of Tokyo, Hiroshima, Nagasaki and countless other cities and built Japan’s postwar miracle.

The question naturally arises: Will today’s Japanese, having met disaster with the stoical grace of their grandparents, also show their grandparents’ strength and determination to recover...